Salesforce (CRM) Q1 Earnings: What to Expect
Despite executing on all cylinders, Salesforce (CRM) hasn’t escaped the massive rotation out of high-growth tech stocks that the market has been on since the start of the year, despite the fact that Salesforce continues to benefit from tailwinds from digital transition as companies strive to get closer to the consumer and optimize their operations.
Is now a good time to bet on the stock’s rebound? Investors will have the answer to that question with the company reports first quarter fiscal 2022 earnings results after the closing bell Tuesday. Wall Street analysts have gotten bearish on Salesforce stock heading into its earnings report. Most recently, while citing “mixed” checks going into the quarter, investment firm Cowen lowered its price target on the cloud computing company. Analyst Derrick Wood trimmed the price target by 20% to $225.
“Our field checks point to a very large contract closing w/ a top customer, but we also think this year generally has a softer book of renewal business vs. last year,” Wood wrote in a note to clients. Wood also lowered his estimates for current revenue performance obligations in the quarter by one percentage point to 23%, compared to 24% in the prior quarter. The downside revised estimates have factored into the stock performance. Since reaching its all-time high of $312 in November, shares have been in a clear downtrend, losing as much as 37%.
Since the start of the year, the stock has lost 35% of its value, including declines of 8% and 42% in the respective one months and six months, trailing the S&P 500 index in both spans. The company’s SaaS business model and its customer relationship management continues to be industry standard, but on Tuesday investors will nonetheless look closely at Salesforce’s billings and booking metrics to assess whether the fundamental story is still positive.
For the three months that ended April, Wall Street expects the San Francisco-based company to earn 94 cents per share on revenue of $7.38 billion. This compares to the year-ago quarter earnings of $1.21 per share on revenue of $5.96 billion. For the full year, ending January 2023, earnings are projected to decline 2.7% year over year to $4.65 per share, while full-year revenue of $32.06 billion would rise 21% year over year.
The stock’s performance does not reflect the sustained growth in the company’s business. Salesforce’s four major business segments are each growing strongly: Sales Cloud, Service Cloud, Platform and Marketing & Commerce Cloud. The latter has been the main driver of Salesforce’s subscription growth and its revenue stream. The CRM platform which offers business intelligence insights also allows companies the ability to centralize data and personalize customer service.
Salesforce has steadily grown its shares in these end markets. The company’s ability to meet complex business problems has been the key differentiating factor, despite the emergence of competitive threats from the likes of Workday (WDAY) and Snowflake (SNOW). In the fourth quarter, the company beat on both the top and bottom lines, reporting arguably one of the best quarterly performances in its history. Q4 earnings came to 84 cents per share on $7.33 billion in revenue, topping consensus estimates for 75 cents share on revenue of $7.24 billion. The company guided for full-year profits to be in the $4.62 and $4.64 per share, while revenue is forecasted to be between $32 billion and $32.1 billion, up from prior guidance of $31.7 billion and $31.8 billion.
In other words, there are no signs of slowing down, and on Tuesday, Salesforce will need to show continued strength and momentum in its core business.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.